Sunday, April 15, 2007

Emotions

Trading Goddess left a comment under my eariler post referencing her post found here

let me touch on something she wrote...

"Every single person involved in the stock market has that in them. Emotion. Fear. Greed. Excitement. Passion. Sorrow. Apprehension. Joy."

When you first start trading that may be the case but after you learn to treat it like a career I can say 100% that I do not feel any emotion towards any positions. All those emotions listed don't benefit your trading at all. If you have a system and you trade that system, you become stone cold. If a trade goes against you and you sell based on your system, sure you may say "fuck AMGN" and show some emotion but in reality that kind of emotion means nothing. It's like stubbing your toe.

When you exhibit those emotions listed when in a position, it won't serve any benefit to you. If you have emotions left over that linger about a position, it won't serve you. There are always, coulda, woulda, shoulda moments that are entirely pointless to dwell on.

TG makes another point...."They may look at the chart and say "Wow! That is one good looking chart!" Or, "Look at that gap up! This is going to be a nice trade!" Or, even... "That chart looks like crap and is going down!" "

That is not emotion, that is just stating what you see. It's like when a dentist sees a bad cavity he may say "oh wow! look at that sucker". It does not effect his way of thinking, he just goes about his job. If that dentist said "look at this cavity! I must drill it now without putting any freezing on it because it's so damn bad"....well you get the point.

TG goes on to say...."There is nothing wrong with having a passion for the stock market. There is nothing wrong with getting excited when you see that green on the screen. There is nothing wrong with enjoying a company's products or growth. Even the bow-tied Jim Rogers has feelings for the market! We all do. But, some just don't, or won't, admit it."

Yes I agree there is nothing wrong with any of this. Having passion for the market and enjoying trading is different than being fearful or greedy while in a position. When I stated that you must become like a robot, I simply meant that you cannot, without exception, let emotions stray you away from your system.

There are many stocks that people love to trade. And they trade them over and over again. Heck, I know someone who has been trading just ORCL for 5 years. 5 years. He loves that stock!

Everyone has done one or more of the things you mentioned. And, imo, everyone will always have some sort of feeling in the future.

As long as you acknowledge that and that is where the logic and being realistic comes in, which I mentioned in my January post. You still have feelings. You still have thoughts. You still have emotions. But logically and realistically, you know what must be done to be profitable.

And, imo, we will always have emotions or thoughts or feelings even while in a "trade" as you say. I believe the successful investor is an experienced investor who is realistic as well as logical and does not let their emotions change their original strategy.

I learn something every single day in the stock market, either by personally doing something or by reading or hearing about something from another trader or investor, such as yourself.

Why would I feel greed/fear/regret/joy etc. (detrimental emotions) towards a postion? I buy based on what I see and my strategy (technical) or on a thought/thesis (experience), if it reaches my sell point or the thesis changes either way, I get out. I don't let anyhing else dicate what I do.

I also don't allow myself to trade too big on any position nor do I have any regrets about taking a loss. It's part of what we do.

The psychological aspect of trading is just as important as your experience in the market. I strongly believe that you have to build yourself up mentally, in a certain way if you are to succeed. Much of that has to do with distancing yourself emotionally from the noise yet still filtering enough in that you know what's going on.

It's a very underrated topic that is never really talked about to the general investing public.

Also one other point. yes like you said "Everyone has done one or more of the things you mentioned." (re emotions).

And many will continue to do those things. When we all first started out we were probably much more guilty of doing all that. But if you isolate and identify just how pointless & detrimental these emotions are, you'll be better off.

Many traders blow up their accounts in a relatively quick span solely based on trading emotionally. And yes i did so too in the past. I didn't find consistent profits until I learned to remove emotions from trading.